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Wednesday, November 13, 2019

Lawyer needed to have verbal fee-sharing agreement in writing to enforce his claim: Appeals panel

By Dan Churney | May 13, 2016

Law money 03

An Illinois appeals court has upheld a McHenry County judge’s ruling that a Chicago lawyer is not obliged to give a slice of his $1.4 million legal fee to the suburban lawyer who referred a malpractice case to him, because the referring lawyer didn’t abide by rules requiring he inform the client the fee would be split.

The May 10 opinion was issued by a three-justice panel of the Illinois Second District Appellate Court by Justice Robert Spence, favoring Chicago lawyer Bruce R. Pfaff over Crystal Lake lawyer Richard P. Naughton. Justices Susan Hutchinson and Donald Hudson concurred.

Hutchinson, however, took the opportunity to throw in some words of admonishment to Pfaff.

"The practice of law is an honorable and revered profession. It is not a battlefield where knights in not-so-shining armor, when they are fortunate to recover funds on a client's behalf, should refuse to share their prize with justly deserving colleagues as if they were all knaves," scolded Hutchinson.

Naughton filed suit in 2010 against Pfaff, alleging he referred a medical malpractice case to Pfaff in 2006, with the purported understanding Naughton would receive one-third of Pfaff’s legal fees upon a successful conclusion to the suit. Naughton had referred previous cases to Pfaff, in which Naughton was listed on the retainer agreement – signed by the plaintiff – as the referring attorney entitled to a one-third cut. However, in the 2006 case, Naughton was not included on the retainer agreement, according to court papers.

After Pfaff settled the case for $7.9 million in 2008, Pfaff allegedly refused to give Naughton any portion of his fee; one-third would have amounted to about $469,000. Pfaff denied fee arrangements were part of any generalized agreement he had with Naughton regarding referrals. Naughton filed suit for the money, but McHenry County Judge Thomas Meyer granted Pfaff’s motion to dismiss in 2015, saying Illinois Rules of Professional Conduct required the client to agree in writing that the fee would be divided with Naughton.

The Illinois Rules of Professional Conduct, which are promulgated by the Supreme Court of Illinois, govern the behavior of lawyers.

The appellate court concurred with the lower court determination, ruling it was not only Pfaff’s obligation, but also Naughton’s, to make sure the client acknowledged at the outset of the case, on the written retainer agreement, the fee would be split. By not doing so, Naughton forfeited his claim to part of Pfaff’s fee.

Even though Justice Hutchinson agreed Naughton did not qualify for any money, she stressed that Pfaff engaged in questionable behavior. She derided his “convenient memory” concerning conversations about the referral, saying it “runs afoul of the direction of the appellate court that ‘[a]ttorneys should act reasonably towards each other.’”

Observing that when new lawyers are sworn in, Hutchinson said they are almost always reminded their word is their “most valuable asset,” but such reminders did not lead to an “honorable resolution in this case.”

Naughton has been a lawyer in Illinois since 1972, concentrating on wills, estate planning and business incorporation. He was represented by the Chicago firm of Walker Wilcox Matousek.

Pfaff has been a lawyer in Illinois since 1984, concentrating on personal injury cases. He was defended by the firm of Herbolsheimer, Lannon, Henson, Duncan & Reagan, of downstate LaSalle, and the Chicago-based firm of Swanson, Martin & Bell.

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Organizations in this Story

Herbolsheimer, Henson, Duncan, Gift, Eiten and Hintz, P.C.Swanson Martin & Bell LLPWalker Wilcox Matousek LLPPfaff, Gill & Ports Ltd.Illinois Second District Appellate Court